Bangladesh may receive around $1.3 billion in the next tranche of the ongoing loan program from the International Monetary Fund (IMF) in June.
However, before the funds are released, the government will have to demonstrate visible progress in several key economic reform measures, according to relevant sources.
These include making the exchange rate more market-based, increasing revenue collection, gradually reducing subsidies, and addressing structural weaknesses in the banking sector.
To discuss these issues, a three-member high-level delegation led by Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, will arrive in Dhaka on a two-day visit starting March 23.
Ahead of the delegation’s arrival, the IMF’s resident representative, Maxim Krishko, paid a courtesy call on Finance Minister Amir Khasru Mahmud Chowdhury at the Secretariat Sunday.
Earlier, on March 13, he also held a courtesy meeting with Bangladesh Bank governor Md Mostakur Rahman.
During the Dhaka visit, the delegation will meet Prime Minister Tarique Rahman, Finance and Planning Minister Amir Khasru Mahmud Chowdhury, and Bangladesh Bank Governor Md Mostakur Rahman.
The discussions are expected to focus on the progress of the ongoing loan program, the pace of reform implementation, and the new government’s economic priorities.
Officials at the Ministry of Finance say the IMF will mainly seek a clear message from the new government regarding its political commitment to implementing the program.
The issue may also be discussed during sideline meetings at the IMF–World Bank Spring Meetings scheduled to be held in Washington in April. After that, a regular IMF mission may visit Dhaka to move forward with the formal process of releasing the next tranche.
The IMF loan program for Bangladesh was approved in January 2023.
Initially valued at $4.7 billion, it was increased to $5.5 billion in May 2024 at the request of the interim government.
The funds are scheduled to be disbursed in seven tranches. Of this amount, Bangladesh received about $3.65 billion until June last year. However, the release of new tranches has remained suspended since November last year following the fifth review.
Condition update
According to the IMF’s assessment, progress in implementing the programhas been mixed.
Some areas have advanced while others have lagged behind. In particular, revenue collection has been significantly below the targeted level.
At the same time, a high-level strategy for restructuring the banking sector has not yet been finalized.
The IMF has also noted that the program’s conditions were not fully followed regarding intervention in the foreign exchange market.
However, there have also been some positive developments.
The primary budget deficit target has been achieved, there has been some improvement in building foreign exchange reserves, international payment arrears have declined, and limits on quasi-fiscal lending have been maintained.
The IMF’s observation, however, states that the budget deficit target was achieved by reducing spending in development and social sectors.
Officials at the Ministry of Finance said Bangladesh has already fulfilled several key conditions under the IMF loan program. However, progress is still needed in some areas.
Officials said the government has its own economic policies and development priorities. Therefore, decisions during discussions with the IMF will be taken considering the country’s macroeconomic realities and long-term interests.
Economists say maintaining the IMF program is important for Bangladesh at a time of global uncertainty.
Dr. Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM) and Professor of Economics at the University of Dhaka, said successfully completing the IMF program is extremely important for Bangladesh.
According to him, one of the main reasons for the stalemate in discussions last year was the wait for talks with an elected government and the slow pace of reform measures, particularly the shortfall in efforts to increase tax collection.
He warned that if the IMF’s assessment is weak, other development partners also become cautious in providing financing. As a result, it may affect access to multilateral loans and budget support.
Zahid Hussain, former lead economist of the World Bank’s Dhaka office, said: “A new government has taken office, and the global situation is uncertain. Therefore, this meeting with the Prime Minister will be very important. I believe the continuity of the loan program should be maintained.”
According to him, Bangladesh could also discuss extending the program timeline or seeking additional financial assistance under the same arrangement.
Officials at the Ministry of Finance say Bangladesh still remains among the countries with the lowest revenue-to-GDP ratios in the world.
Many individuals and institutions are not paying taxes properly. As a result, measures such as restructuring the VAT system, limiting tax exemptions, and increasing the minimum turnover tax are being considered to boost revenue collection.
